On Oct. 18, 2019, the Securities and Exchange Commission (SEC) Division of Investment Management staff published Frequently Asked Questions Regarding Disclosure of Certain Financial Conflicts Related to Investment Adviser Compensation (FAQs). Many in the industry view the FAQs as overdue SEC guidance in an area that has been a focus of the SEC Division of Enforcement. Registered investment advisers (RIAs) should review the FAQs in light of continuing enforcement actions in this area, including the…

The U.S. District Court for the Western District of Texas recently clarified the applicable rate for the calculation of prejudgment interest under the Texas Securities Act (TSA). In FDIC v. Deutsche Bank Securities Inc., the FDIC, acting as receiver for Guaranty Bank, brought claims against the defendant bank under the TSA stemming from the sale of residential mortgage-backed securities prior to the financial crisis. While discovery was ongoing, the defendant moved for partial summary judgment…

On June 5, 2019, the SEC adopted Regulation Best Interest (“Reg BI”), which requires broker-dealers and associated persons to make recommendations regarding securities transactions (or investments involving securities) that are in the “best interest” of their retail clients. The SEC also adopted Form CRS, requiring broker-dealers and investment advisers to provide a brief relationship summary to retail investors, and issued two pieces of guidance regarding investment advisory activities. This Alert focuses largely on Reg BI.…

On Monday, July 8th, FINRA and the SEC took the unusual step of issuing a joint statement on broker-dealer custody of digital asset securities. In doing so, the Staffs of the SEC’s Division of Trading and Markets and of FINRA’s Office of General Counsel made clear that the SEC and FINRA will continue to apply the existing regulatory framework to the rapidly evolving world of digital assets. The joint statement notified market participants that any…

On June 5, 2019, the Securities and Exchange Commission adopted, by a 3-1 vote, Regulation Best Interest (“Reg BI”) which, in the words of Chairman Clayton, would “substantially enhance the broker-dealer standard of conduct beyond existing suitability obligations.” The Chairman also noted: “the standard of conduct draws from key fiduciary principles and cannot be satisfied through disclosure alone.” The Commission also passed the new Form CRS Relationship Summary and two interpretations under the Investment Advisers…

On May 21, the North American Securities Administrators Association (NASAA)—an organization comprised of 67 securities regulators within the United States (all fifty states as well as districts and territories), Canada, and Mexico—released a model cybersecurity rule package governing state-registered investment advisors’ cybersecurity and privacy practices.  The model rule package, which would need to be adopted by an individual state so as to become law in that jurisdiction, provides a structure for how state-registered investment advisers…

This week, the Federal Energy Regulatory Commission (“FERC”) issued an order rescinding its Notice of Alleged Violation (“NAV”) Policy. The NAV Policy was put in place by a 2009 order and authorized FERC’s Office of Enforcement Staff (“OE staff”) to ask the FERC Secretary to issue a public NAV at the stage of the investigation after the subject has had a chance to respond to OE staff’s preliminary findings. This usually happened at about the…